1099-C Received from “Servicer”

My personal take on this is that borrowers who receive this form for “forgiveness of debt” should probably send a letter or form of contest to the IRS stating the objection to the filing of the 1099-C. The objection or contest should state, in most cases, that this has been filed by a party who had no right, title or interest in the loan and that the form is not indicative of any final resolution of the debt, which is owned by third parties unrelated to the filer.

One of  my favorite legal research firms just published a short blurb on the subject:

The Lawletter Vol 43 No 7 Charlene Hicks—Senior Attorney, National Legal Research Group

To date, no consensus has been reached among courts throughout the United States on the question as to whether a creditor’s issuance of an IRS Form 1099-C results in the extinguishment of the reported debt in favor of the debtor. Form 1099-C bears the title “Cancellation of Debt,” and, according to the IRS, a creditor should issue this form to the debtor for any year in which a debt is cancelled. Depending on the state in which the debtor resides, a creditor’s issuance of a Form 1099-C may have the effect of barring further collection efforts and of completely discharging the reported debt.             The two divergent approaches taken by courts on this issue result in opposite outcomes. The majority approach is illustrated by the Fourth Circuit’s opinion in FDIC v. Cashion, 720 F.3d 169 (4th Cir. 2013).

Read more at: http://www.nlrg.com/legal-content/the-lawletter

My opinion is this: if the filer had no right to collect or enforce it follows that it had no right to cancel the debt. This ploy is enabling hundreds of companies to take tax deductions costing taxpayers billions of dollars. Meanwhile recipients of these fabricated forms with false information are stuck wondering whether they now owe tax on debt forgiveness. I think they don’t owe anything and that after they file a letter of protest or objection, the false income on the 1099-C should be ignored.

9 Responses

  1. For anyone in CA, our laws do not allow for a 1099 to be issued but they all do it. I never reported any of mine to IRS and never heard word one from them. In CA, the crooks only get one remedy so when they take your home by way of non judicial foreclosure, that is all they get. When they are claiming a 1099A, that is taking another bite of the apple so to speak and is totally illegal in CA!

    They are however allowed to issue a 1099C on a home equity line of credit which I was floored by when it happened to a friend whom I am trying to help with this situation. I think it is appauling but it seems that corruption breeds more corruption.

    Thing is the Heloc became unsecured once the 1st mtg was foreclosed on so now the rules for debt collection are in play. It is a contract so they have 4 years to collect the debt. IMO if it is past that time then they should be barred from making a 1099C. I am still researching this
    for the friend so don’t know yet how I am going to shut it down.

    I could go and just make up a corrected form and send it in to irs but that can be risky, not that i give a hoot! Will let you know how it turns out once i finish my research and make it happen.

  2. Reblogged this on Deadly Clear.

  3. Please if anyone out there is able to expand on this information about what Neil is saying regarding 1099 C. We where foreclosed on in 2018 by Ocwen. Has anyone done what Neil has stated? How did the IRS respond? Any tax Attorney recommendation in California?

  4. I had this come up with OCWEN after a mod 3 years ago .. the mod stated that forgiveness would occur in the out years ,, OCWEN took the loss immediately though ,, took 2 months to get a resolution from the IRS .. in my favor.. filed a whistleblower form on it but it went nowhere ,, the IRS seemingly allows this fraud unless you call bullshit on it.

  5. still doesn’t answer the several questions raised

  6. go directly to this link here:

    the initial link in Neil’s blog is the main blog page from NLRG and thus the article of interest gets pushed down the list as new posts are made and eventually hard to find.

  7. the issue of whether the submitter is authorized to issue a 1099 is unclear, as if the submitter is the so-called “original creditor”, or is he at the time of 1099 submission merely a “servicer”, or has he re-purchased the debt from the trust, created through securitization and if not does a “servicer” have the right to issue a 1099, thus getting a tax write off? Who is the true party in interest suffering loss? If there is an offsetting demand deposit account, how can there be any provable loss reflected in the ledger at all? if the demand deposit account was “abandoned” and served as the source of the original “loan”, the books will not show any “loss” at all, therefore the tax deduction and the issuance of the 1099 would all be false reporting, would they not?

  8. We received 1099 A . What should we need to do?

  9. Had one from Ocwen for 298,000. after a mod principle reduction. All is was is the bs interest that climbed through the roof in the years they wouldnt cooperate or talk solution.

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